What is the MMSignal?

MMSignals Historical Correlations

How can MMSignal be an Market Indicator?

MMSignals Expansions

What is the MMSignal?

The MMSignal is a panic/euphoria index for the broad US stock market, i.e., the S&P 500 index. It is a mathematical value generated by our proprietary model, which is based on the market data of more than 5 decades. Our model digitalizes the panic (or complacency) level of the general investing communities with regard to the equity market. Combined with a very unique method of technical analysis, this model provides an independent, yet objective, measurement of how the investing public is reacting to the market with their money. 

Our index is different from other market models or technical indicators in two major aspects. First, its mathematical value does not have a limit range even though its value is also dimensionless. Depending on the strength of the bullishness or bearishness of the market as seen by our proprietary model, it can be ultra high when the MMSignal considers it is bearish or very low (in negative territories) when it thinks the market is too bullish. This allows us to keep tracking the market under all conditions. For instance, while the extremes for the S&P 500 index is normally from +10 (panic) to -10 (euphoria), we have seen +35 (extreme panic) in 2001. Many other models or technical indicators, on the other hand, are ranged within -1 to +1. There are period when these indicators stay on their extreme levels either at -1 or +1 while the market still moves significantly. Second, the MMSignal is neither a technical indicator nor a mathematician’s toy of market modeling. It is composed of a panic/euphoria factor and a valuation factor. While each of these two factors tracks the market movements well they tend to show some delays. When combining them into our model, we have optimized the percentage ratios of each based on the market data since 1950. This dramatically improves its effectiveness in terms of market timing.

When the MMSignal is zero, our model means that the investing public’s fear/love of the equity market is balanced. Theoretically, it implies that the market will stay flat. If the MMSignal is positive (above zero), it suggests that the investing public is more panic, which implies that the market should go down as a fearful investor would take more defensive positions. On the other hand, when the MMSignal is in negative territory (below zero) our model indicates that the investing public has more love than fear with the stock market, which implies that they tend to pour more money in and drive the S&P index higher. The graphs below show how it tracks the market movements.

The first graph is a 52-week chart of the MMSignal for the S&P 500 index. Below it is how the S&P 500 moves during the same period of time. From these two graphs you can see that the MMSignals model clearly detects all major market moves. For example, two deep bottoms of the S&P 500 index in mid-April 2005 and mid-October 2005 are both detected with a variation of less than 2 days. For those who have access to Citigroup’s panic/euphoria model (you can have a glance of it each week on Barron’s magazine), you can compare the two and will find that while Citigroup’s model in general also tracks the market movements, it gives delayed signals for the market moves. For instance, Citigroup's model called for market bottoms in the early May and early November 2005. If we followed it and decided to buy the S&P 500 in early May 2005, and early November 2005, we would have missed the market bottoms by roughly 2-3 weeks. In these 2-3 weeks a lot of easy money has been made already by our members.

What is the MMSignal?

MMSignals Historical Correlations

How can MMSignal be an Market Indicator?

MMSignals Expansions

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